Recent research from Mortgage Trust revealed 96% of advisers received commission from lenders, pocketing on average £428 per case. With every lender adopting a different procuration fee structure depending on the product type, mortgage advance and even the introducer, the market is becoming very competitive.
Procuration fees can range between flat fees per case of £150 to £500, or percentage fees of anywhere between 0.2% of the advance up to as much as 2.25% for some sub prime deals - and of course individual deals are often negotiated between specific lenders and intermediaries.
With less than a fifth of IFAs operating solely on a fee-based revenue (fee charged to client for advice), a major source of income for many advisers will be the procuration fees paid by lenders. So at what point does a procuration fee become a consideration in the advice process?
In today's dynamic and complex mortgage market, it is inevitable that advisers play a key role in its success. With almost 3,000 prime mortgage products to choose from and 7000 sub prime deals, each with very different rates, fees, incentives and features, it can be a daunting prospect for a consumer to look for the best deal themselves.
Since the launch of MCOB (mortgage conduct of business) in October 2004, the intermediary has become further entrenched in the application process, taking on board a raft of regulation and in the near future the possibility of providing automated valuation models (AVMs) at the point of sale.
There is a healthy cycle of competition in the mortgage arena, with brokers competing for clients and lenders for brokers. But does this competition always benefit the consumer? Of course competition between lenders will lend itself to more competitively priced deals, but as lenders also compete for brokers, not by the competitiveness of their product but on the income paid, there seems to be a conflict of interests.
